- Active Management
Refers to the manager and is a polar opposite of the passive fund manager.
An active fund manager makes individual choices about what to have in the portfolio depending on his/her investment beliefs and style.
- Age Weighted Plan
- A plan that requires a testing provision, but can usually provide the oldest participant the highest percentage contribution.
- Appreciation
- The increase in value of an asset. The opposite of depreciation.
- Asset Allocation
A key concept in financial planning and money management.
Asset allocation is the process of dividing investments among different kinds of assets, such as stocks, bonds, real estate and cash, to optimize the risk/reward tradeoff based on an individual’s or specific situation and goals.
- Benchmark
A standard, used for comparison. The benchmark relative to the particular fund provides a base for comparison and attempts to provide a standard of measure for the fund type. There are minimal to no fees built in these benchmarks.
When you compare the Guild funds to their appropriate benchmark, the Guild funds have fees already removed including investment management fees, administrative fees, transaction fees, and all other costs associated with the fund.
- Bond
- A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing from Investors.
- Capital Appreciation
Refers to the growth of your principal investment.
If you invest $100 in a stock or mutual fund and its value increases to $120, the $20 increase is called capital appreciation.
Capital appreciation or growth is a specific long-term objective of many mutual funds.
- Capitalization
The total amount of all securities, including long-term debt, common and preferred stock, issued by a company. Also known as market capitalization, it is the market value of a company's stock, which gives a picture of the company's size.
Capitalization is calculated by multiplying the price of shares by the number of shares outstanding (in the hands of the public).
For example, if a company has one million shares outstanding, and the company’s stock price is $10 per share, then the company has a market capitalization of $10 million.
- Capitalized Company
Capitalized company (i.e. Medium, Large & Small) relates to the company size in terms of total market value.
The S&P, for example, contains Large Cap companies exclusively, and when the net asset value of any one of those companies goes under a designated dollar amount, it is then considered Mid Cap.
The next level down is Small Capitalization Stocks (Small Cap). There is thought to be more risk involved thus volatility as the market cap begins to decrease. Refer to the Risk/Reward Grid.
- Corporate Bonds
Bonds issued by a corporation traded on major exchanges. Generally, these bonds pay higher rates than government or municipal bonds since the risk is higher.
Corporate bonds have a wide range of ratings and yields because the financial health of the issuers can vary widely.
- Cross Tested Plans
- A defined contribution profit sharing plan. The plan design allows a company to target different levels of contributions to different groups.
- Destination Funds
A determined asset allocation portfolio seeking growth and income by investing in a diversified selection of stocks and bonds.
The fund employs a strategy designed for investors targeting a specific future retirement date.
- Diversification
A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction.
The goal of diversification is to reduce the risk in a portfolio. The underlining theory is that diversification reduces risk because not all asset classes or industries or individual companies move up and down in the value at the same time or at the same rate.
- Dividend
A taxable payment declared by a company’s board of directors and given to its shareholders out of the company’s current or retained earnings, usually quarterly.
Dividends are usually given as cash (cash dividend), but they can also take the form of stock (stock dividend) or other property. Dividends provide an incentive to own stock in stable companies even if they are not experiencing much growth. Companies are not required to pay dividends.
The companies that offer dividends are most often companies that have progressed beyond the growth phase, and no longer benefit sufficiently by reinvesting their profits, so they usually choose to pay them out to their shareholders.
- Emerging Markets
Financial markets in countries with developing economies.
These markets are immature compared to those of the world's major financial centers, but are becoming increasingly sophisticated and integrated into international markets; they provide potentially high returns but are intensely volatile.
- Employee Retirement Income Security Act (ERISA)
The Employee Retirement Income Security Act (ERISA) of 1974 is often referred to as ERISA.
ERISA is a comprehensive federal statute governing employee benefits and pension plans. This Act prescribes federal standards for funding, participation, vesting, termination, disclosure, fiduciary responsibility, and tax treatment of private pension plans.
ERISA regulates and enforces employee benefit and retirement plans.
- Equities
- Instruments that signify an ownership position, or equity in the form of common stock or preferred stock in a corporation, and represents a claim on its proportionate share in the corporation's assets and profits. Also called equities or equity securities or corporate stock.
- Fixed Income
Usually refers to bonds.
The Bond pays a specific interest rate until maturity therefore the income is “fixed.” This fixed rate is paid periodically throughout the life of the bond until maturity.
- Guaranteed Investment Contract (GIC)
A pension plan funding-vehicle in which an insurer accepts a single deposit from a plan sponsor for a specified period of time, such as five years, and holds the deposit at a specified rate of interest.
At the end of the period, the deposited funds, including accumulated interest, are returned to the plan sponsor, who can reinvest the plan assets with the insurer or with another party.
A GIC is also called a guaranteed income contract or a guaranteed interest contract.
- GUST
- An acronym that stands for a series of four recent tax laws that made changes to how retirement plans are operated.
- Index
In economics and finance an index (i.e., price index or stock market index) is a benchmark of activity, performance or any evolution in general.
Indexes do not have any expenses associated with them.
- Indexing
- Purchasing individual securities or index funds to mirror a broad-based index such as the S & P 500. The aim is to mirror the index’s performance.
- Mutual Funds
Open-ended funds, (having no set limit, either in time or money), operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives.
Mutual funds raise money by selling shares of the fund to the public, much like any other type of company can sell stock in itself to the public.
The major advantage of the mutual fund as an investment vehicle is that the risk is spread over many stocks thereby lessening the risk to the investor. The opposite of which is investing in single-issue stocks. The single-issue investor is vulnerable to the performance of that one particular stock and thereby assumes a much higher level of risk.
- Passive Management
- An investment style that mirrors an index. For example: The fund manager of the S&P Index fund is considered a Passive Manager. Because you cannot invest directly in the Index, these managers follow the movements of the index and “mirror” the activity of their specific index.
- Portfolio
- A collection of investments all owned by the same individual or organization. These investments often include stocks, which are investments in individual businesses; bonds, which are investments in debt that are designed to earn interest; and mutual funds, which are essentially pools of money from many investors that are invested by professionals or according to indices.
- Principal
- An original investment dollar amount, (an item of value purchased for income or capital appreciation). “The principal investment in the mutual fund was $100.00.”
- Sector Fund
A distinct subset of a market, society, industry, or economy, whose components share similar characteristics. Stocks are often grouped into different sectors depending upon the company’s business.
Standard & Poor’s breaks the market into 11 sectors. Two of these sectors, utilities and consumer staples, are said to be defensive sectors, while the rest tend to be more cyclical in nature.
The other nine sectors are: transportation, technology, health care, financial, energy, consumer cyclical, basic materials, capital goods, and communications services. Other groups break up the market into different sector categorizations, and sometimes they are broken down further into sub-sectors.
Examples of Guild Sector Funds: Internet Technology, Healthcare, Real Estate and Socially Responsible Funds.
- Synthetic Guaranteed Investment Contract (synthetic GIC)
A deposit instrument most commonly available from trust companies or banks requiring a minimum investment at a predetermined rate of interest for a stated term, one year, five years, etc.
Generally, synthetic GICs are non-redeemable and non-transferable prior to maturity, but there can be exceptions.
- Volatility
- The relative rate at which the price of security moves up and down. If the price of a stock moves up and down rapidly over short time periods, it has high volatility. If the price almost never changes, it has low volatility.
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